Navigant Research Blog

A house is not merely the sum of four walls and a roof. As urbanization, rural development, and economics continue to change the way people think about homeownership globally, new formulas for home design, technologies for efficiency, and home value are emerging.

In particular, in new home construction or retrofits the house is increasingly viewed as a system, rather than merely a structure – one in which the lighting technology, and the heat it emits, influence the type of HVAC unit to be installed, for example. From the design phase on, four walls and a roof can consume less energy and cost less, as well, when treated as a system. Around the world there are many emerging approaches to the home-as-a-system idea, representing many different approaches for redefining value in the housing sector. Le Corbusier’s notion of a house as a “machine for living” has been updated for an era of energy management and holistic design.

In Europe, the PassivHaus standard emerged in the late 1980’s, when the idea of super low energy consuming homes emerged out of several research projects. While the technologies used in the PassivHaus design are not all that innovative, the treatment of all the building materials as inputs to a system is novel. Using tight home envelop design, geographic orientation, and combinations of super-insulation and efficient windows and doors, the PassivHaus can reduce energy consumption to only 15 kWh per square meter, without adding much advanced technology. In the United States, the average home consumes roughly 137.8 kWh per square meter, according to the 2005 EIA Residential Energy Consumption Survey.

Meanwhile, in Japan, a systems approach to designing residential buildings is starting to look more high-tech from the curb. Battling severe electricity supply instability in the aftermath of the Fukushima disaster, Japanese companies are working together to provide a net energy-positive home that can serve as an active input into the electricity system. Recently, Kyocera, in conjunction with Nichicon and Samsung SDI, announced a new home energy management system that combines roof-top solar, on-site lithium-ion battery storage, and an IT-based energy management system, with sales beginning in summer 2012.

Around the world, shifting notions of home design and technical feasibility are being driven forward by country-level and regional initiatives. As a result, small companies with regional footprints and global corporations with large market shares are aligning their supply to accommodate new demand for a wide variety of residential energy efficiency needs. This market, and the opportunities it presents to all market players, form an increasingly important input into the management of the electricity system.

Gartner recently forecast that the plug-in electric vehicle in the United States would reach 100,000 sales in 2012. This would be a significant increase over the 18,000 sold in 2011, but in a growing market like the PEV market, perhaps it’s possible. Perhaps, but there are a number of challenges in reaching that goal, including the number of models available, continued market confusion, low gas prices and high vehicle prices.

There are currently only two PEV models widely available in the US, the Chevrolet Volt and Nissan Leaf. At the moment these both seem on track to reach about 19,000 and 20,000 vehicles, respectively, in sales this year. While, as Gartner points out, there will be capacity for production of 50,000 Leafs in Tennessee, production and sales are very different and production can easily and quickly be adjusted to match sales rates. History is riddled with vehicles that either don’t meet or exceed production expectations.

Early this year the Prius Plug-in, Focus Electric, and Mitsubishi I will join the race. Later this year, the Tesla Model S and Ford C-Max Energi will reach the market. All of these, with the possible exception of the Prius Plug-in, seem destined to sell in numbers of 10,000 or less this year.

Toyota’s original target for the Prius Plug-in was 16,000-17,000 vehicles, after launching in January. However, it’s actually launching in March. Pike Research has this vehicle pegged at about 7,900, which may be a little low, but I don’t anticipate sales in the first year with limited availability will be significantly higher.

Why do we forecast smaller volumes in 2012? Market confusion persists on the difference between battery electric vehicles and plug-in hybrids (with probably some pockets of lingering confusion about regular hybrids as well). This confusion has left many potential buyers hesitant. Additionally, gas prices here in the United States are still low, relative to the rest of the world. The average gas price in 2011 was $3.61, and prices fell in early 2012 (though they’ve climbed again, at least here in the Detroit area).

Finally, as I’ve pointed out before, the prices for PEVs are disappointingly high for many potential buyers. These prices limit mass appeal. This is probably one of the most challenging problems with the market and is one of the reasons that the lower-priced Prius Plug-in has the potential for strong growth. Without significantly increased gas prices or significantly lower PEV prices, many of these vehicles will remain a luxury item for many mainstream buyers.

Pike Research will be revisiting our PEV and market share forecasts this spring, and by then we will have a good measure for whether Gartner’s rosy forecast is realistic or whether our scenario is more likely. The market is slowly coming of age, and we do expect that the US will hit about 120,000 PEV sales in 2013, and over 300,000 by 2017.

Thermostat giant Honeywell is not sitting back in the fight for the future of the thermostat. The company recently filed a patent infringement suit against Nest Labs – the startup thermostat maker launched by former Apple execs.

Honeywell’s suit, filed with a U.S. district court in Minnesota, also targets retailer Best Buy, which sells the Nest Labs thermostat. Honeywell claims the Nest product infringes on seven patents (details here), and seeks to recover unspecified damages. Honeywell has also recently filed patent-infringement suits against Venstar and ICM Controls for alleged infringement of patents covering thermostats and combustion controls.

Though the legal outcome of this suit is unclear, the immediate impact will be to force Nest Labs and Best Buy to defend themselves at a time when the product is just getting off the ground. The legal costs will hurt Nest much more than Best Buy, of course, given the difference in company sizes. And the negative publicity will be hard to swallow as well. Beyond the legal costs, Nest will have to shift some focus and resources away from marketing its product, and that will damage its market potential, at least short-term.

In the longer-term, this type of patent spat could be a harbinger of future legal fights as new entrants try to disrupt older players with in-home smart grid technology solutions that may or may not have patent protection. For disrupters the message is clear: Have your patents fully vetted, or risk similar legal action.

The wider impact could end up on a more positive note for consumers. Why? Because if the lowly thermostat can be tweaked and a giant like Honeywell is feeling heat from an upstart, then better products and services are the likely outcome. Even if Honeywell prevails with its suit, the notion of a smarter thermostat has created new buzz in the marketplace – and consumers usually benefit when competition is in the air.

Our nation’s capital is swirling with hot air about the fate of energy-related jobs, from fossil fuel (the high-profile Keystone XL pipeline) and wind power, specifically the expiration of the federal production tax credit (PTC) for wind and geothermal power facilities.

February 21st was the deadline established by Republicans in Congress for a decision on the controversial Keystone project, designed to carry oil from tar sands in Alberta, Canada south to the Gulf of Mexico. Keystone XL proponents frequently tout the American Petroleum Institute’s claim that $7 billion investment in the pipeline will create 20,000 jobs. According to a study performed by Cornell University’s Global Labor Institute, though, the real American employment numbers are closer to 10% or 20% of that amount: 2,500 to 4,650 jobs. In official filings with the State Department, pipeline proponents acknowledged that only several hundred of these jobs will be permanent.

While President Obama has already signaled his lack of support for Keystone, expect plenty of heated rhetoric on the matter, as presidential politics increasingly focus on the role of future energy supplies on job growth in the U.S.

According to the American Wind Energy Association (AWEA), the job consequences of the PTC will be much greater. According to a study performed by Navigant Consulting on behalf of AWEA, as many as 37,000 jobs could be lost over the next four years if the PTC is not extended. Budget negotiations to extend the payroll tax extension failed to include an extension of the PTC, so chances for a near term extension of this 2.2 cent-per-kilowatt-hour subsidy are looking slimmer and slimmer. This is at least the 10th time this federal subsidy has come up for a vote over the past two decades, highlighting the stop-and-go nature of U.S. energy policy, buffeted by ever-shifting political winds.

State Renewable Portfolio Standards (RPS) are the primary driver of future electricity resources, so the overall renewable sector will still grow, but wind – usually the lowest cost resource – will decline as an overall percentage of the power mix, raising the cost of power for ratepayers.

The wind power industry is actually one of the few success stories when it comes to the “inshoring” of jobs, as the domestic content of wind turbines has been going up, not down, over the past decade. The loss of the PTC would hit an industry already showing signs of a shake-out akin to what’s been happening in the solar space. For example, Vestas of Denmark, the world’s leading wind turbine manufacturer, has already laid off workers overseas and has threatened to also cut jobs in the U.S. if the PTC is not extended.

One solution is to actually develop a long-term energy strategy that would phase out as many subsidies as possible in exchange for some level of support certainty that would decline over time. California tried this approach with solar PV, establishing a 10-year program with declining subsidies known as the California Solar Initiative. Imagine if we did this with all energy sources – including fossil fuels, which have historically enjoyed the largest amount of government subsidies.